An Austerity Budget? Maybe the Germans are on to Something

As Chancellor Angela Merkel’s embattled government gets ready to thrash out an austerity program to rein in the budget deficit, fears are growing that stringent cuts might choke off growth and anger voters. But after 50 years of near-continuous spending hikes, there is ample scope for radical savings that would not hurt public services and may even boost the economy.

The German government is putting the finishing touches this week on an austerity program that offers a chance of a fresh start, not just for the country’s complex and bloated tax and welfare system, but also for Chancellor Angela Merkel.

Yes, the taxes included are significant: a higher tobacco tax, and new levies on nuclear fuel rods, airline ticket purchases and financial transactions.

This is telling:

The Americans don’t like the plans. The atmosphere was decidedly frosty at a meeting last week in Berlin between US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schäuble, because the two men fundamentally disagree. Geithner urged the Europeans to spend more and to run up debts to boost economic growth and help the global economy. Schäuble countered that high debts were the root of the turmoil now engulfing the euro zone.

In our experience, Germans are especially leery of deficit-induced inflation, certainly more than Americans. Something about Weimar …